Mozambican economists predict long-term gains from the African Free Trade Area

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Mozambican economists predict long-term gains from the African Free Trade Area

4:26 CAT | 05 Jan 2021

Photo: O País

Economist João Mosca says that the gains from the African Continental Free Trade Area will be long term and for Mozambique, the biggest advantage will be in imports. Luís Magaço in turn points out that the agreement will strengthen economies and ensure a larger market for products.

The Free Trade Area in Africa has been in place since the first day of the year, and economist João Mosca has been explaining in practical terms how it works.

Under the agreement “trade relations between countries are made freely, that is, without paying customs tariffs and with reduced administrative and loyal procedures. What can be there is only the registration of people, goods and statistical effects of foreign trade,” whose gains will be long term, Mosca says.

“I’m talking about 40, 50 or more years. The European Union was created in the early 1970s and it is only 60 to 70 years later that the free market is functioning almost fully, not yet fully. The results are very long-term, dependent on there being political will, deep legal reforms and important transformations to the economic fabric,” Mosca says, adding that the lack of a strong industry in Mozambique may limit what the country gains from free trade.

“For Mozambique, at the most there will be gains from imports and investments. National investors will be able to benefit from cheaper imported products from other countries. However, that could compromise the competitiveness of Mozambican producers.

“It has the disadvantage that competition from imported products may halt or hinder economic growth because, for example, imported tomatoes will compete with Mozambican farmers who, in principle, will not have much capacity to offer the same good at a competitive price, and therefore will not have the ability to place his or her production on the market due to pricing situations and other conditions.”

Luís Magaço notes that this agreement was signed by almost all countries on the continent, although only 24 – including Mozambique – have ratified it. The treaty has a six-month preparation period.

For Magaço, “the importance of this agreement is fundamentally that it expands the market for products produced in Africa. Certainly, this agreement will strengthen economies and companies and, perhaps, our participation in international trade,” because the countries of the continent will enjoy the upper hand in doing business in the broader market.

By José João

Source: O Pais